What Every Girl Boss Needs to Know About Choosing the Right Small Business Loan
Written by Chatty Garrate
So, you’re finally ready to launch a small business with that idea that’s been stirring inside your head for so long. Or maybe you already have an existing business but are itching to scale it. You go, girl! Not everyone has the drive, confidence, and perseverance to take the plunge and set up something bigger than themselves.
You already know that this path isn’t going to be easy. The road to success is riddled with challenges you must face with your chin up. One of which is securing the funding you need to get your business off the ground or grow it to the next level.
Enter small business loans.
Look, we get it. Loans, financing, numbers—all of this sounds overwhelming. But a loan can provide you with the capital you need to start or expand your business, hire employees, purchase inventory or equipment, and more.
Of course, there are many loan options available, and this might be where the confusion kicks in. Not to worry, though, because we’ve got you covered!
1. Know What Your Business Needs Are
The very first step in choosing the right small business loan requires you to get a little introspective and know what your business needs are.
How much funding do you really need? What will you use this money for? How long will you need the loan? Answering these questions will help you narrow down your options and find a loan that meets your specific needs.
2. Know Your Credit Score
Your credit record is another big factor you must consider so that you can qualify for a loan for your small business.
A high credit score can improve your chances of getting approved for a loan and might even get you lower interest rates and fees! On the other hand, a low credit score can make it a little bit difficult to qualify for a loan or result in higher costs.
3. Know The Lender’s Requirements
Each lender has its own requirements for loan applicants, such as a minimum credit score, minimum revenue, and time in business. Requirements vary significantly from lender to lender, so make sure to understand what they are before applying.
4. Know The Interest Rate and Fees
The interest rate and fees on a loan can have a significant impact on the total cost of borrowing. Interest rates can be fixed or variable and may be based on certain factors like your credit score, the amount of the loan, and the repayment term.
Fees can include application fees, closing costs, and prepayment penalties. These fees can vary widely among lenders.
5. Know The Repayment Terms
Speaking of repayment terms, this is also something you should definitely consider, as it can affect your ability to repay the loan and manage your cash flow. Make sure you understand the repayment schedule of whatever loan you’re getting, including the payment amount, frequency, and duration.
Some loans may have a fixed repayment schedule with a set monthly payment, while others may offer more flexibility with variable payments or interest-only periods. Choose a repayment plan that fits your budget and business goals.
6. Know The Lender’s Reputation
Look for reviews, ratings, and testimonials from other business owners who have worked with the lender you’re considering. You can also check with the Better Business Bureau or other industry associations to see if there have been any complaints or legal actions against the lender.
A reputable lender should have a transparent application process, clear terms and conditions, and responsive customer service. They should also be willing to answer any questions you have and provide you with the information you need to make an informed decision.
7. Know Alternative Financing Options
Beyond small business loans, there’s more to explore when it comes to financing options. Depending on what your business needs are at this moment, you can find funding through other sources, such as:
Crowdfunding. Platforms like Kickstarter and Indiegogo can help you raise money for a new product or project by getting support from a large number of individuals.
Business Grants. Government agencies, foundations, and private organizations offer a variety of grants to support small businesses in specific industries and regions.
Small Business Credit Cards. If you need to cover small expenses, a small business credit card can offer a flexible line of credit with rewards and other benefits.
Microloans. Microloans are small loans typically offered by non-profit organizations or community leaders to support small businesses in underserved communities.
Earned Wage Access. If you are just starting out and have access to your earned wages, you can use a small portion of your paycheck to add a little to your capital for your small business or side hustle.
Exploring these alternatives can give you more flexibility and potentially save you money on interest rates and fees.
Grow Your Business With The Right Small Business Loan
Choosing the right small business loan requires careful consideration on your part, so it’s very crucial that you do your research. By weighing your options, you can find a loan that helps you achieve your business goals while minimizing costs and risks.
Bio: Chatty Garrate is a fur mom of 4 cute cats, and like a curious cat, she's a curious writer. She explores and writes about different topics. Her favorites are business, personal finance, and tech.